US embassy cable - 04TAIPEI3509

UNCLAS TAIPEI 003509 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EB/TPP/ABT, STATE PASS AIT/W, 
DHS/CUSTOMS, DHS/CUSTOMS FOR JANEST LABUDA, USTR FOR DAVID 
SPOONER, COMMERCE FOR JAMES LEONARD 
 
E.O. 12958: N/A 
TAGS: ETRD, EIND, KTEX, TW 
SUBJECT: TAIWAN RESPONSE TO TEXTILE TRANSSHIPMENT MOU 
DEMARCHE 
 
REF: STATE 224893 
 
 1.  This is an Action Request.  Please see Para 8. 
 
2.  Summary: AIT/T delivered reftel demarche to Taiwan's 
Board of Foreign Trade (BOFT) Import/Export Director Peter Ho 
November 5.  Ho was accompanied by several staff and 
representatives from the Taiwan Textile Federation (TTF).  Ho 
protested that there was not enough time to fully consult 
with manufacturers before the end of 2004.  He had several 
concerns on the draft Memorandum of Understanding (MOU), most 
significantly the question of whether Taiwan could provide 
manufacturer (as opposed to exporter) information on the 
invoice, and whether this MOU would require Taiwan to retain 
some type of licensing requirement for textile exporters.  He 
asked that AIT/T request additional information from 
Washington agencies on these and other questions in order to 
allow him to discuss the MOU with appropriate government 
offices and private industry contacts.  The TTF 
representatives suggested that its members might be reluctant 
to support such an MOU.  End summary. 
 
3.  AIT/T shared the text of the draft MOU with BOFT November 
5 and discussed the possibility of signing such an agreement. 
 Ho began by noting that AIT and TECRO had been negotiating a 
textile transshipment agreement in 2001, but that those 
discussions had been suspended.  He protested the short time 
frame, noting that the  Agreement on Textiles and Clothing 
(ATC) is scheduled to expire January 1, 2005.  Ho objected 
that it would be very difficult to consult within the 
government and with manufacturers in time to have an 
agreement ready to be signed before January 1.  He then 
outlined several specific concerns with the draft MOU. 
 
4.  Ho noted that with the end of the Multi-fiber Arrangement 
(MFA) and the ATC, many of the U.S. laws and regulations that 
governed trade in textiles might lapse.  He requested 
information regarding new U.S. regulations governing textile 
trade after January 1, 2005.  BOFT was concerned that the MOU 
would require Taiwan to revise its regulations to mandate 
that manufacturer information be included on invoices and 
other documentation.  Currently, only export information is 
required.  Ho wondered if this kind of requirement by the 
U.S. would violate WTO principles.  Econoff reminded BOFT 
that this draft MOU was based on one that was currently being 
negotiated with Hong Kong and that voluntary regulation to 
prevent illegal transshipment would not violate WTO rules. 
 
5.  BOFT and TTF expressed concern that Taiwan manufacturers 
could react negatively to provisions allowing for joint 
visits to determine whether rules of origin were being 
circumvented.  TTF representatives advised that many 
manufacturers were eagerly looking forward to expected 
savings from reduced regulatory requirements when the MFA and 
ATC go out of force.  They would not likely be eager to 
continue devoting resources to complying with a new licensing 
or inspection regime. 
 
6.  BOFT also questioned whether all textile products would 
be covered by the proposed MOU or just those at risk of 
transshipment.  Ho asked whether Hong Kong and Macao were 
planning to continue their current licensing regime or adopt 
some other mechanism to certify textile exporters.  He also 
suggested including language from the abandoned 2000 draft 
textile transshipment MOU that would require the U.S. to 
provide prior notice when denying entry. 
 
7.  Comment: The initial reaction from BOFT to signing the 
proposed draft MOU indicates that more work needs to be done 
to educate the government and industry about the need for 
this agreement.  While BOFT is willing to consider signing an 
MOU, given the short time horizon, it is not likely that an 
agreement can be reached before the end of 2004 without a 
significant investment of resources. 
 
8.  Action Request: Please provide answers to BOFT questions 
contained in Paras 4-6 and advise whether EB/TPP/ABT and USTR 
would be willing to allow for more time to negotiate an 
agreement that could be signed early in 2005. 
PAAL